China's exports have continued to rise sharply, increasing by 27% in June compared to the same period last year, driven by a boom in artificial intelligence (AI) investment. However, despite this export growth, domestic recovery in consumption and investment remains sluggish, raising concerns about deepening structural imbalances in the Chinese economy.
According to the General Administration of Customs, June exports exceeded market expectations, significantly surpassing the previous month's growth rate of 19.4%. Earlier, Reuters had projected a modest slowdown to 18.2%.
Imports also rose by 36% during the same period, exceeding both the previous month's increase of 27.4% and Reuters' forecast of 24%. As a result, the trade surplus for June reached $125.6 billion, marking the second-largest monthly surplus on record.
The surge in exports is attributed to increased demand for electronic and information technology products, including computing servers and data center equipment, fueled by AI investment. The General Administration of Customs noted that exports of electronic computers and IT devices continued to grow at double-digit rates, contributing 6.9 percentage points to the overall export growth in the first half of the year.
While imports also saw a significant increase, this was largely driven by rising imports of high-performance semiconductors and higher semiconductor prices, rather than a recovery in domestic consumption.
Despite the positive export and import figures, experts warn that these gains have not translated into a recovery in private consumption and employment, exacerbating structural imbalances in the economy.
A recent survey conducted by Reuters among 54 economists projected China's GDP growth rate for the second quarter at 4.5%, a slowdown from the first quarter's growth rate of 5.0% and below the April forecast of 4.7%. This figure is at the lower end of the Chinese government's growth target for the year, which is set between 4.5% and 5.0%. China is scheduled to release its second-quarter GDP data on July 15.
Goldman Sachs recently reported that while exports continue to support overall economic activity, domestic demand has noticeably weakened. The firm noted that the increase in exports has not sufficiently stimulated the job market or improved corporate profitability, limiting the broader economic impact.
In fact, consumer spending in China fell in May for the first time in nearly three and a half years since the COVID-19 pandemic, and fixed asset investment has also been in decline for two consecutive months, indicating ongoing domestic weakness.
However, market analysts suggest that the likelihood of immediate large-scale economic stimulus measures is low. Given that exports and advanced manufacturing are supporting growth, it is expected that Chinese leadership will maintain the current policy stance for the time being. The Chinese leadership plans to evaluate the economic performance of the first half of the year and finalize economic policy directions for the second half at the upcoming Central Political Bureau meeting later this month.
Zhou Hao, chief economist at Guotai Junan Securities, told Bloomberg that the resilience of external demand has reduced the urgency for policymakers to implement aggressive stimulus measures.
Nonetheless, concerns about structural stagnation in the Chinese economy are growing. According to the Hong Kong Ming Pao, economist Li Daokui from Tsinghua University stated at a macroeconomic seminar held at Renmin University on July 11 that the simultaneous stagnation of real estate and infrastructure investment has led to a prolonged economic downturn in China for three years.
He warned that the current broad unemployment rate in China has reached 10.2%, with approximately 24 million people in long-term unemployment, which poses a threat to social stability. This figure is double the urban unemployment rate of 5.1% reported by the National Bureau of Statistics in May.
Li pointed out that the infrastructure investment, which has driven China's economy for the past 20 years, has significantly contracted due to fiscal deterioration. He suggested that the central government should substantially increase the planned issuance of new government bonds this year (12 trillion yuan) to actively invest in areas affecting people's livelihoods, such as local government debt resolution, unsold housing purchases, affordable housing supply, and rural welfare expansion.
In the meantime, the Chinese government is also preparing long-term measures to boost consumption recovery.
On July 13, the State Council approved the '15th Five-Year Plan for Consumption Expansion,' aiming to increase China's total retail sales from the current 50.1 trillion yuan to 60 trillion yuan by 2030, an increase of about 10 trillion yuan (20%). The plan includes fostering nine service-oriented consumption sectors, including elderly care, childcare, cultural tourism, healthcare, automobiles, AI, agricultural products, and winter sports.
* This article has been translated by AI.
Copyright ⓒ Aju Press All rights reserved.